Mr. Schweikert
introduced the following bill; which was referred to the
Committee on Financial
Services

A BILL

To amend the Securities Exchange Act of 1934 to require
the Securities and Exchange Commission to allow publicly traded companies with
a certain sized public float to change their stocks’ tick sizes to increase
liquidity by incentivizing capital commitment, research coverage, and brokerage
support, thereby increasing the stocks’ liquidity and investor interest, and
for other purposes.

1.

Short title

This Act may be cited as the
Spread Pricing Liquidity Act of
2013.

2.

Tick size for
certain issuers

(a)

In
general

Section 11A(c)(6) of
the Securities Exchange Act of 1934 (15 U.S.C. 78k–1(c)(6)) is amended to read
as follows:

(6)

Tick size for
certain issuers

(A)

Selection

(i)

In
general

The board of
directors of an issuer with a public float of $500,000,000 or less (based on a
rolling average over the course of the preceding 3-month period) and an average
daily trading volume of less than 500,000 shares may select to have the
securities of the issuer quoted and traded using an increment of either $0.05
or $0.10.

(ii)

Manner of
selection

A selection under this subparagraph shall be made by
informing the Commission and each exchange on which the securities of the
issuer are quoted or traded.

(iii)

Limitation on
certain issuers

With respect to the average trading price in the
most recent 1-month period for the securities of an issuer—

(I)

if such average
price is less than $1, the issuer may not make the selection under this
subparagraph; and

(II)

if such average
price is $1 or more, but less than $2, the issuer may only select to have the
securities of the issuer quoted and traded using an increment of $0.05.

(iv)

Consultation

In making a selection under this
subparagraph, the board of directors shall first consult with the issuer’s
primary listing market.

(B)

Trading
requirements

If an issuer has
made the selection under subparagraph (A)—

(i)

all quotes of the
securities of such issuer shall be done using only the increment
selected;

(ii)

an exchange on which the securities of such
issuer are traded may not charge a fee for a person engaging in such a trade,
unless such fee is uniform for all trades and based solely on the number of
shares traded; and

(iii)

such selection
shall not prevent the securities of the issuer being traded at increments other
than the increment selected.

(C)

Right to opt out
of selection

(i)

In
general

An issuer that has made the selection under subparagraph
(A) may choose to opt out of such selection at any time after the 6-month
period beginning on the date such selection was made.

(ii)

Manner of opt
out

An issuer that chooses to
opt out of the selection under subparagraph (A) shall do so by informing the
Commission and each exchange on which the securities of the issuer are quoted
or traded.

(iii)

Future
selection

Subject to
subparagraph (D), an issuer that opts out of the selection under subparagraph
(A) may make the selection under subparagraph (A) again at any time after the
1-year period beginning on the date of the opt out.

(D)

Treatment of
issuers surpassing cap

If the
public float of an issuer that has made the selection under subparagraph (A)
rises above $500,000,000 (based on a rolling average over the course of a
3-month period) or the average daily trading volume of the issuer raises above
500,000 then, after the end of the 3-month period beginning on the date of such
occurrence—

(i)

the issuer shall
no longer be considered to have made the selection under subparagraph (A);
and

(ii)

the issuer shall
be ineligible to make a selection under subparagraph (A) during the 2-year
period beginning after the end of such 3-month period, regardless of the
issuer’s public float or average daily trading volume.

(E)

Study and
Report

(i)

In
general

Not later than the
end of the 9-month period beginning on the date of the enactment of this
paragraph, and annually thereafter, the Commission shall carry out a study of
the quoting and trading of securities in increments of $0.05 and $0.10
permitted by this paragraph, and the extent to which such a system is
increasing liquidity by incentivizing capital commitment, research coverage,
and brokerage support.

(ii)

Report to
Congress

Upon the completion of each study described under clause
(i), the Commission shall issue a report to the Congress containing all of the
findings and determinations made in carrying out such study, along with any
legislative recommendations the Commission may have.

(F)

Definitions

For
purposes of this paragraph:

(i)

Average daily
trading volume

With respect
to a security, the term average daily trading volume means the
average, over the previous 3-month period, of—

(I)

the aggregate
daily volume for bids made on the security within the price band; and

(II)

the aggregate
daily volume for offers made on the security within the price band.

(ii)

Price
band

With respect to a
security, the term price band means the range between the price
that is 25 cents below the trading price of the security and the price that is
25 cents above the trading price of the security.

(iii)

Public
float

The term public float means the amount of
equity of an issuer that is held by persons who are not affiliated with the
issuer, determined by multiplying the number of shares of such stock by the
price of one of such
shares.

.

(b)

Effective
Date

(1)

In
general

Section 11A(c)(6) of the Securities Exchange Act of 1934,
as amended by subsection (a), shall take effect—

(A)

with respect to an issuer with a public
float of $100,000,000 or less (based on a rolling average over the course of
the preceding 3-month period) and an average daily trading volume of less than
100,000, on the date of the enactment of this Act;

(B)

with respect to an issuer that is not
described under subparagraph (A) and that has a public float of $250,000,000 or
less (based on a rolling average over the course of the preceding 3-month
period) and an average daily trading volume of less than 250,000, after the end
of the 3-month period beginning on the date of the enactment of this Act;
and

(C)

with respect to an issuer that is not
described under subparagraph (A) or (B) and that has a public float of
$500,000,000 or less (based on a rolling average over the course of the
preceding 3-month period) and an average daily trading volume of less than
500,000, after the end of the 6-month period beginning on the date of the
enactment of this Act.

(2)

Definitions

For purposes of this subsection, the terms
average daily trading volume and public float
have the meaning given those terms, respectively, under section 11A(c)(6)(F) of
the Securities Exchange Act of 1934.